Albertsons 2002 Annual Report Download - page 35

In July 2001, the Company amended its postretirement health care and
life insurance benefit plan, making changes to plan eligibility, benefit cover-
age, and premium subsidization. This amendment resulted in a decrease in
the plan’s benefit obligation of approximately $8.3 million in fiscal 2002.
For both the pension and the postretirement benefit calculations, the
weighted-average discount rate used was 7.25 percent and 7.75 percent
for fiscal 2002 and 2001, respectively, the expected return on plan assets
used was 10.0 percent for both fiscal 2002 and 2001, and the rate of
compensation increase was 3.5 percent and 4.0 percent for fiscal 2002
and 2001, respectively.
The assumed health care cost trend rate used in measuring the accu-
mulated postretirement benefit obligation was 10.0 percent in fiscal 2002
and 6.0 percent in fiscal 2001. The assumed health care cost trend rate
will decrease by one percent each year for the next five years until it
reaches the ultimate trend rate of 5.0 percent. The health care cost trend
rate assumption has a significant impact on the amounts reported. For
example, a one percent increase in the trend rate would increase the accu-
mulated postretirement benefit obligation by $7.7 and $10.1 million in fiscal
2002 and 2001, respectively, and the net periodic cost by $0.6 and $1.0
million in fiscal 2002 and 2001, respectively. In contrast, a one percent
decrease in the trend rate would decrease the accumulated postretirement
benefit obligation by $7.2 and $7.7 million in fiscal 2002 and 2001, respec-
tively, and the net periodic cost by $0.5 and $0.8 million in fiscal 2002 and
2001, respectively.
The Company also maintains non-contributory, unfunded pension plans
to provide certain employees with pension benefits in excess of limits
imposed by federal tax law. The projected benefit obligation of the
unfunded plans was $18.8 and $21.0 million at February 23, 2002 and
February 24, 2001, respectively. The accumulated benefit obligation of
these plans totaled $14.2 and $17.0 million at February 23, 2002 and
February 24, 2001, respectively. Net periodic pension cost was $2.8, $2.2
and $3.5 million for 2002, 2001, and 2000, respectively.
Segment Information
The Company’s business is classified by management into two reportable
segments: Retail Food and Food Distribution. Retail Food operations
include three retail formats: extreme value food stores, price superstores,
and supermarkets. The retail formats include results of food stores owned
and results of sales to extreme value food stores licensed by the Company.
Food Distribution operations represent the second reportable segment and
include results of sales to affiliated food stores, mass merchants, and other
logistics arrangements. Management utilizes more than one measurement
and multiple views of data to assess segment performance and to allocate
resources to the segments. However, the dominant measurements are
consistent with the consolidated financial statements and accordingly, are
reported on the same basis herein.
The financial information concerning the Company’s continuing opera-
tions by reportable segment for the years ended February 23, 2002,
February 24, 2001 and February 26, 2000 is contained on page 19.
Significant Customer
During fiscal 2002, no single customer accounted for ten percent or greater
of net sales or accounts receivable. During fiscal 2001, Kmart represented
10.5 percent of net sales. Receivables outstanding for Kmart at February 24,
2001 were $70.0 million or 11.4 percent. The supply contract with Kmart
terminated on June 30, 2001. During fiscal 2000, no single customer
accounted for ten percent or greater of net sales or accounts receivable.
Shareholder Rights Plan
On April 24, 2000, the Company announced that the Board of Directors
adopted a Shareholder Rights Plan under which one preferred stock pur-
chase right will be distributed for each outstanding share of common
stock. The rights, which expire on April 12, 2010, are exercisable only
under certain conditions, and may be redeemed by the Board of Directors
for $0.01 per right. The plan contains a three-year independent director
evaluation provision whereby a committee of the Company’s independent
directors will review the plan at least once every three years. The rights
become exercisable, with certain exceptions, after a person or group
acquires beneficial ownership of 15 percent or more of the outstanding
voting stock of the Company.
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